Corporate cannabis takeover fight goes national

Submitted by: R.E. Graswich

The battle between California's industrial cannabis producers and independent growers has gone national.

Over Easter weekend, the New York Times featured the conflict on the front page of its Sunday editions with a story headlined, "Growers Split As Pot Farms Go Industrial."

Reporter Thomas Fuller focused on a 47-acre Salinas Valley farm run by Steve DeAngelo and Harborside Farms. Fuller writes, "Some are worried that the marijuana business is getting too big too fast and predict a glut of California marijuana and sharp price declines."

The story notes wholesale cannabis prices in California are declining, while retail prices are holding steady.

The trend favors big operations such as Harborside, which runs large dispensaries in Oakland and San Jose. By lowering wholesale costs and keeping customer prices high, big dispensaries improve their bottom line.

Tawnie Logan, board chair for the California Growers Association, tells The Times many cottage and independent growers feel betrayed by the industrialization exemplified by Harborside.

"For them, the name of the game is the profit margin," she says.

The battle has been running for several years. When the State Legislature approved a three-bill package to regulate medical cannabis in 2015, the big fight was over whether California should mandate independent distribution licenses for cannabis.

The big players said no. They wanted to control every aspect of production -- from growing to manufacturing to distribution to retail sales.

Craft and independent growers fought back, saying they needed independent distribution to keep the marketplace open and prevent industrial-sized companies from pushing out small growers.

The legislature agreed with the craft growers. Independent distribution was written into laws governing medical cannabis.

Then came Prop. 64, the adult-use initiative passed by voters last November.

Prop. 64 was written by lobbyists representing large growers and paid for by hedge funds. It removed language mandating independent distribution -- allowing large growers to control their entire supply chains.

Now state regulators are trying to align and reconcile the conflicting set of rules, one for medical and another for adult-use. Gov. Brown has weighed in, siding with the big operators. Brown proposes to erase requirements for independent distribution licenses.

The legislature will have the final say. Lobbyists for the industrials are pushing for vertical integration, where they can become licensed as distributors, wholesalers and retailers.

Trade groups such as CGA are saying wait a minute -- let's keep the marketplace fair, independent and open. They want producers and retailers prevented from owing distribution licenses.

California has a long and successful history of independent distributorship in the alcohol trade. And the case for protecting independent and craft businesses is compelling -- after all, the little guys created the cannabis market in California.

Here's the New York Times story.